FPL: Supporting the Needs of Global Cross Asset Trading
Carl Weir of HSBC and Gregg Drumma of Gamma Three Trading discuss how the newly formed Global Cross Asset Committee (GCAC) is helping to support existing FPL asset class focused committees in their best-practice, educational and promotional efforts.
In early 2012, the FPL Global Steering Committee (GSC) discussed the need for a new committee to oversee multi-asset class activities and strategic considerations given many of the common issues and overlapping initiatives of FPL’s Derivatives, Fixed Income and Foreign Exchange committees. The GSC proposed the creation of the Global Cross Asset Committee (GCAC) to oversee the Global Fixed Income, Global Foreign Exchange, and Global Derivatives committees and report directly to the GSC.
While equity markets have matured and been electronic for some time, there has been rapid movement towards a more electronic workflow in other asset classes. Historically, each asset class was segregated, but times have changed and are continuing to do so quickly. Exchange and marketplace consolidations have expanded global liquidity to offer multiple assets. Buy-side firms are increasingly diversifying their portfolios to add a wide range of assets to manage risk and improve returns. Sell-side counterparties are offering increased access and merging desks. A subsequent need for order/execution management systems to handle combined asset coverage has driven vendors to provide solutions to support wide asset coverage. This also includes an everexpanding range of over-the-counter (OTC) products and instruments. Once the GSC recognized the need for a committee, a call for nominations for the newly formed GCAC was sent to FPL members in March 2012, with an election held soon after. Gregg Drumma, Founder and President, Gamma Three Trading, LL C and Carl Weir, EMEA Head of Cross Asset FIX Connectivity, HSBC Global Banking and Markets were elected as co-chairs for a two-year term. Both co-chairs have years of experience in the electronic trading markets of multi-asset trading.
At the time of writing, over 50 representatives from almost 40 different FPL member firms had joined the committee. The members represent a global presence and cover a complete cross section of single and multi-asset exchanges, products, sell-side, buy-side and vendor firms. The committee’s success is driven by its members and the voices from all markets and participants over the entire trade lifecycle.
The GCAC will provide oversight, guidance and help coordinate the efforts of the Derivatives, Fixed Income and Foreign Exchange committees, and provide its findings to the GSC for consideration in specifications, best-practices, and educational and promotional efforts. As a first step towards this goal, an initial survey was distributed to the GCAC members on a range of topics relating to FIX and multi-asset trading, education and forward-thinking technology crossover integration. The results are being collated to help direct the committee to the immediate needs of its members and will be published shortly for group review. The survey questions included topics relating to specific asset classes and technical concerns, regulatory issues, instruments, the discussions around professional certification and training, in addition to certification of the FIX Protocol, and also offered additional room for comment on topics not covered.
When working outside equity markets, there are many more data elements and complexities to consider. While FIX usage is strong in the listed derivatives, foreign exchange and the fixed income markets, there is much wider implementation of FIX versioning and use of custom tags within these assets compared to equities. Standardization and best practice suggestions across asset classes will help improve adoption success. In addition to the business flow, backward compatibility of FIX versioning is used to support older systems where possible. Each of the asset class sub-committees is working toward providing direction in their area, and GCAC works to unify them.
The promotion of FIX adoption within the pre-trade and trade environment for these asset classes is consistent with the recommendations set forth in the widely adopted Investment Roadmap, which FPL produced in collaboration with other leading standard bodies. The Investment Roadmap promotes the increased use of non-proprietary, free and open standards that have already achieved mass adoption. Since its launch the Investment Roadmap has been providing the industry with clear direction as to which standards are, and should be used to support business processes throughout the various stages of the investment life cycle to provide optimal transparency, consistency and operational efficiencies.
To enable FPL to ensure that all responses to regulatory consultations are submitted in a manner that reflects the interests of its members, FPL has regulatory focused groups active in different regions globally. The GCAC will work with these groups to review the FPL regulatory initiatives and their impact on the markets with respect to cross-asset electronic trading and the FIX Protocol. For example, MiFiD II and EMIR in EMEA and Dodd-Frank in the US markets are topics being actively discussed.
Working with the Global Education and Marketing Committee, the GCAC will also look at how it can promote FIX adoption and use outside the equity space. This includes raising awareness of the current multi-asset support as well as improvements and updates on work achieved by the committee. While the equity markets have widely adopted FIX, there is still capacity for growth in other assets, and of course inter-asset interoperability.
FPL members who are involved in any aspect of the topics discussed here are encouraged to join the GCAC. The success of the FIX Protocol is attributed to the involvement of its highly respected community: the more members involved, voices heard and knowledge shared – the greater its success. If you would like to find out more about the GCAC, please contact the FPL Program Office, [email protected].